Modeling and analytics and their role in business [Q&A]

Businesses are collecting more data about their operations and their customers than ever before. But data in itself is only part of the story. For it to be useful it’s necessary to spot patterns and gain insights.

At this point most businesses turn to analytics, but this can only tell you what’s happened in the past. To predict future trends means using algorithms to build models of what may be complex systems.

So, is it time to abandon analytics and turn to modeling? Or do businesses really need to embrace both? We spoke to Michel Morvan, co-founder and executive chairman of complex modeling specialist The CoSMo Company to find out more.

BN: Is analytics on its own no longer sufficient for business purposes?

MM: It really depends on the business. Some can get by with a good understanding of what has happened in the past and using that knowledge to make decisions about what will happen in the short term. Their predictions won’t always be right 100 percent of the time about what happens next but neither do they need to be. If Amazon or Google, for example, serve me product recommendations or advertisements that are right only 90 percent of the time, they’ll still be able to build a fantastic business on top of those analytics.

Other business, though, need to get their decision making right a lot more often. A company that is making a significant strategic investment, a city that is building a new subway line, a pharmaceutical company that is launching a new drug — all of these demand accuracy in predictions about the long term effects of their decisions. Traditional analytics can only tell such companies how things have worked in the past when what they really need is knowledge of how things will evolve in the future.

BN: What can modeling offer that analytics can’t?

MM: Traditional analytics can tell business almost everything about what has happened in the past. Business can identify correlations in that data and use their knowledge of the business and their own intuition to decide what decisions to make next.

Modeling and simulation, like that which we power with CoSMo technology, moves beyond this. We don’t just identify correlations but instead identify causal relationships. This means that we can say what happened, why it happened, and whether it will happen again. What’s more, modeling allows businesses to run multiple ‘what if’ scenarios to see the impact of their decisions over time. Instead of wondering whether a correlation will continue, modeling and simulation will show with certainty what will happen in the future under different scenarios. There’s really no limit to how many scenarios can be tested, how many variables can be adjusted, and all of this makes it possible for a business to determine the optimal decision to take with confidence.